Government's investment policy for Gozo

De minimis non curat lex. Literally, this Latin legal dictum translates into "the law does not concern itself with trifles".

European Union law has adopted this popular legal maxim and has introduced a de minimis rule in its acquis. This rule allows State aid of slight value and of insignificant importance to be granted to undertakings in Member States.

It was therefore, euphemistically speaking, disappointing to read in The Times of December 16 that the Prime Minister declared in Parliament that the government is basing its investment policy for Gozo on this rule of minimal relevance and importance. Apart from the recently announced approval of a plastic card factory which is due to set up shop in Gozo and employ 58 persons over three years - one earnestly hopes that this will come true as all is grist that comes to the mill - foreign and Maltese investment has been shying away from Gozo for the past decade and there would be no prospects whatsoever of attracting it to the island in the coming years by just flagging the de minimis rule. An ad hoc fully-fledged business promotion policy for Gozo is direly needed.

The application of de minimis aid to Gozo does not in any way mitigate the additional disadvantages that businesses on the island are burdened with vis-à-vis their competitors on mainland Europe or even on single insularity European islands.

This is, in fact, amply clear as aid under the de minimis rule is not restricted to an underdeveloped and permanently handicapped region or island like Gozo. Businesses in the most advanced regions of Europe are also eligible for it! One thus wonders if there are prize fools in Malta or around Europe to come to and invest in Gozo just to be granted this aid when they can get it without any hassle or worry at home.

Indeed, geographical location is the only aspect of the applicability of the rule for which no restrictions apply. Otherwise it is restrictive in value and scope.

Let me explain.

In 1998, the European Commission was empowered to set out in a regulation a threshold under which aid measures are deemed not to distort or threaten to distort the European market competition by favouring certain undertakings or the production of certain goods.

In 2001 the Commission set a de minimis aid ceiling of €100,000 that could be granted over any period of three years on a moving aggregate basis. The Regulation establishing that aid lapsed at the end of 2006.

Then, taking account of the evolution of inflation and of the gross domestic product in the Community between 2001 and 2006 and also taking account of likely developments through the following seven years, the Commission revised that threshold figure upwards but not farther north of €200,000. That revised ceiling, together with other revised conditions, came into effect on January 1, 2007 and not a couple of months back as mistakenly stated by the Prime Minister.

The other conditions of the present allowable de minimis aid apply to undertakings in all sectors with some important exceptions. It does not apply to undertakings active in the fishery and aquaculture sectors and in the primary production of several agricultural products. It applies, with a certain number of additional conditions, to undertakings active in the processing or marketing of agricultural products. It does not apply, however, to undertakings in difficulty.

More importantly, aid to export-related activities is excluded from the benefit of the de minimis rule.

It is crystal clear that the future of foreign investment in Gozo would be pitch-dark if it were to be based on the government's complacent belief that this rule gives a substantial advantage to Gozo.